How do I write off (deduct) the Plastiq fee on my US tax returns?

Many Plastiq customers who are business owners deduct the Plastiq processing fee as an ordinary and necessary business expense as part of their US federal, state and local business taxes to lower their taxable income.

Most businesses use bank accounts, credit cards, and a variety of financing options to run their businesses, pay bills and manage cash flow. Credit card processing fees, bank account fees, and interest are usually considered both ordinary and necessary business expenses and typically claimed as a deduction from business income.

It doesn’t matter whether the business is organized as a sole proprietor, partnership, LLC, or corporation. Any business entity can deduct the fee, as long as the fee is associated with ordinary and necessary business-related expenses.

Sole proprietors and single-member LLCs can deduct the Plastiq fee on Schedule C attached to their Form 1040. The total processing fees paid during the year can be listed in Part V, Other Expenses, and the total from this section carries to Line 27a in Part II, Expenses (see example below).

Partnerships and LLCs can deduct the Plastiq fee on Form 1065. Include the total processing fees paid for the year on Line 20, Other deductions. You should also attach a statement to the return itemizing the processing fees and any other business expenses included in the total for this line (see example below).

S Corporations can deduct the Plastiq fee on Form 1120S. Include the total processing fees paid for the year on Line 19, Other deductions. You should also attach a statement to the return itemizing the processing fees and any other business expenses included in the total for this line (see example below).

C Corporations can deduct the Plastiq fee on Form 1120. Include the total processing fees paid for the year on Line 26, Other deductions. You should also attach a statement to the return itemizing the processing fees and any other business expenses included in the total for this line (see example below).

If Plastiq is used to pay personal expenses of the business owner or employees, the processing fee is not deductible.

Unless you use Plastiq for business-related expenses, you cannot deduct the Plastiq fee from your tax returns.

Note: This information is for educational purposes only. Plastiq encourages business owners to consult with your tax advisor or accountant about what your business is able to write off and potential tax savings.

Examples

Sole proprietors and single-member LLCs can deduct the Plastiq fee on Schedule C attached to their Form 1040.